Hillary Clinton breaks with Obama on 'Cadillac tax'

Story highlights

  • Errol Louis: Hillary Clinton supports repealing so-called 'Cadillac tax,' a key part of Obamacare that is opposed by organized labor
  • He says could gain her union support, but risks alienating administration and Democrats who fought long and hard for Obamacare

Errol Louis is the host of "Inside City Hall," a nightly political show on NY1, a New York all-news channel. The opinions expressed in this commentary are solely those of the author.

(CNN)Hillary Clinton crossed a political Rubicon by announcing she supports a partial repeal of Obamacare, openly distancing herself from what is far and away the marquee domestic policy initiative of the sitting president. The move will bolster Clinton's support from big labor unions, a critical part of the Democratic Party establishment -- but with it she also risks alienating the President and losing the votes of Obama supporters concerned about protecting his legacy.

Errol Louis
At issue is the so-called "Cadillac Tax" on health insurance plans, a provision of Obamacare that takes effect on New Year's Day in 2018. On that date, insurance plans will get socked with a 40% excise tax on every dollar in insurance premiums above $10,200 for an individual or $27,500 for a family plan.
The money raised from the tax -- an estimated $87 billion -- is essential to paying the cost of the Affordable Care Act. The tax also gives companies an incentive to shop more carefully for health plans instead of loading on benefits.
    But the tax would hit the comprehensive health plans negotiated by unions over the years, giving companies an incentive to limit or terminate health benefits -- or pass the extra costs on to employees -- rather than pay the tax.
    The typical family insurance plan costs about $16,000, so most employees would initially be spared: the levy would initially apply to an estimated 14% of all health plans at companies with 500 or more employees. Because the threshold for activating the text are pegged to inflation, that number is expected to steadily grow, by one estimate to 47% of all plans by 2023 and 65% of all plans by 2028, according to a study sited in The New York Times.
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    Labor leaders have opposed the tax for years; in 2013, the AFL-CIO passed a resolution at its annual convention, promising that the labor federation "will strongly oppose taxing workers' health benefits." The same resolution called for removing the tax from the Affordable Care Act.
    Clinton's Democratic rivals for president, Bernie Sanders and Martin O'Malley, have already called for a repeal of the tax. Clinton, anxious to lock down labor support, had little choice but to join adopt the union's position.
    "I encourage Congress to repeal the so-called Cadillac tax, which applies to some employer-based health plans, and to fully pay for the cost of repeal," Clinton said in a statement.
    But that's sure to draw fire from Obama loyalists. "After decades of fighting for it, we're finally moving towards a more rational, efficient health care system. Let's not screw that up," writes Jared Bernstein, a former Obama administration economist who now runs the Center for American Progress think tank.
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    Bernstein also issued a challenge to opponents: "Anyone who wants to kill the tax has some explaining to do... what's your alternative revenue raiser?"
    That a good question -- one that puts the burden on Clinton--and Sanders and O'Malley, for that matter -- to find tens of billions of dollars a year to defray the cost of Obamacare. Her recently-announced promise to squeeze savings out of other parts of the health care system drew a caustic response from, among others, the Washington Post editorial board.
    "It's hard to say which would be more discouraging," wrote the Post, "that Ms. Clinton knows this is a poor policy call and made it to appease politically influential unions, or that she doesn't know this is a bad choice."
    Clinton can expect more such criticism in the months ahead. She made the logical short-term calculation that she needed to gather union support -- but that choice will draw fire from a wide range of left-leaning Obama supporters that fought the bitter battle to get Obamacare passed.
    If Vice President Joe Biden jumps into the race, expect him to be the No. 1 White House warrior calling Clinton out for trying to unravel the long-sought goal of providing health care for all.